On 6 September, a five-storey building in Delhi’s Satya Niketan being used as a paying-guest facility collapsed, killing seven people, most of them students. The building was unauthorized. It had an illegally dug basement. Within three days, the response had moved from rescue to legislation.
Delhi now proposes a law under which every paying-guest facility must obtain a licence within 90 days, collect no-objection certificates from the police, municipality and local administration, register on a portal, install CCTVs, keep a warden within 500 metres, submit to quarterly inspection by a new committee, and charge rent within bands fixed by another.
Nobody can argue against structural safety. But the tragedy poses a narrower question. Did the Satya Niketan incident take place for want of rules or for want of anyone to enforce the rules in existence? Unauthorized construction was already illegal. An inspectorate that did not notice a basement being dug in a crowded student locality will not notice the next one just because there is now a portal.
So, why does the state reach for a new law instead of an effective inspectorate? Because the two cost different things. Inspectors, engineers and prosecutions consume money and manpower, and both run out. A licence, certificate or a committee consumes neither. It costs the government almost nothing, shifts the cost of compliance onto those being regulated, and is invisible in any budget.
Political scientists call it creeping government. It is the cheapest way to be seen doing something, and after seven deaths, the demand to be seen doing something is overwhelming.
That demand drives a pattern economists have studied for 40 years. In a crisis, the burden of proof reverses. Normally, the state has to justify interfering with a voluntary transaction. In an emergency, it has to justify its non-intervention. The powers it assumes are rarely given up.
Cross-country studies of about 70 countries since the 1970s find that severe crises enlarge government under political parties of nearly every ideology, and that the next government does not reverse it.
The damage shows up less in budgets than in the quality of legal systems and property rights. What ratchets up is not the size of the state, but its presumption: the set of decisions politicians come to regard as theirs.
India has run this experiment twice this year. In June, with West Asia’s oil supply disrupted, the Centre held retail fuel prices steady while raising bulk prices. Commercial buyers moved to retail pumps and diversion followed. This evoked a second intervention on 12 June, placing a 200-litre daily diesel purchase cap and a bar on commercial buyers at pumps, which was withdrawn on 1 July. The first control imposed created a shortage that justified the second.
Sugar is the older reflex. A stockholding limit of 4,000 quintals per dealer came into force on 1 August. On 2 September, the Centre announced its halving to 2,000 quintals effective from 15 September to curb what the order called hoarding.
But a stock is not a conspiracy. It is how supply moves from a month of plenty to a month of scarcity. The Economic Survey of 2019-20 looked at stock limits for pulses in 2006, sugar in 2009 and onions in 2019 and found that price volatility rose after each one of them.
In 2019, states conducted 76,033 raids under the Essential Commodities Act and secured 2,941 convictions, a rate of 3.8%. The Economic Survey’s own verdict was that the 1955 Act enables rent-seeking and harassment and should be scrapped.
The point of principle here was made clearly by economist Friedrich A. Hayek. A price is information about scarcity that no ministry possesses. Suppress the price and the scarcity remains. Only the signal to resolve it is gone.
This is not an exclusively Indian weakness. Scotland froze private rents in October 2022 as a cost-of-living emergency. The freeze became a 3% cap, and the cap became a permanent rent-control regime under the Housing (Scotland) Act of 2025. On 1 September, the Scottish government opened consultations on a proposal of capping the price of bread, milk and eggs in large supermarkets. An emergency measure for housing got transformed into a policy template for food.
Once in place, such measures usually find defenders. A licensed paying-guest facility operator will want the policy’s 90-day window for obtaining a licence kept tight to keep rivals out. Those who pay the cost will do it invisibly: students who may find no space next July and, in the case of food items, farmers who would plant less next season.
The state should instead distinguish between its capacity and control. Capacity means inspectors who inspect, courts that convict and liability that bites. Control means a compliance burden. The first is an investment, the second a substitute for it.
Next, protect people, not prices. A shock makes accurate prices more valuable, not less, so support poor households with transfers and leave price signals alone. Then intervene at the source. Delhi’s answer to every winter of smog is a construction ban. Surat instead built an emissions market for factory exhaust, and they fell 20-30% at lower cost.
Finally, give every emergency power a sunset clause. Once the crisis passes, audit what failed and worked and what must go. A crisis calls for a more capable state rather than a more controlling one. The test of a government is its efficacy in ensuring good outcomes, not the power it wields.
The author is a public policy professional.